mtrx-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________

FORM 10-Q

_______________________________________

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2024


☐			Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File No. 1-15461

__________________________________________

MATRIX SERVICE COMPANY

(Exact name of registrant as specified in its charter)

__________________________________________


Delaware						73-1352174
(State of incorporation)						(I.R.S. Employer Identification No.)

15 East 5th Street, Suite 1100, Tulsa, Oklahoma 74103

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (918) 838-8822

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

___________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MTRX	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Non-accelerated Filer

☐

Smaller Reporting Company

☒

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 8, 2024 there were 27,308,795 shares of the Company's common stock, $0.01 par value per share, outstanding.

Table of Contents

TABLE OF CONTENTS


		PAGE
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2024 and 2023	1

	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended March 31, 2024 and 2023	2

	Condensed Consolidated Balance Sheets as of March 31, 2024 and June 30, 2023	3

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2024 and 2023	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended March 31, 2024 and 2023	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	34

Signature		36

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Matrix Service Company

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(unaudited)


	Three Months Ended				Nine Months Ended
	March 31, 2024		March 31, 2023		March 31, 2024		March 31, 2023
Revenue	$	166,013	$	186,895	$	538,714	$	589,166
Cost of revenue	160,435		182,476		510,688		573,041
Gross profit	5,578		4,419		28,026		16,125
Selling, general and administrative expenses	19,948		16,862		52,792		51,218
Goodwill impairment	—		—		—		12,316
Restructuring costs	—		316		—		2,881
Operating loss	(14,370)		(12,759)		(24,766)		(50,290)
Other income (expense):
Interest expense	(143)		(268)		(787)		(1,556)
Interest income	165		94		477		164
Other (Note 3)	(235)		(116)		4,481		(706)
Loss before income tax expense	(14,583)		(13,049)		(20,595)		(52,388)
Provision for federal, state and foreign income taxes	(2)		(363)		4		(363)
Net loss	$	(14,581)	$	(12,686)	$	(20,599)	$	(52,025)

Basic loss per common share	$	(0.53)	$	(0.47)	$	(0.75)	$	(1.93)
Diluted loss per common share	$	(0.53)	$	(0.47)	$	(0.75)	$	(1.93)
Weighted average common shares outstanding:
Basic	27,443		27,038		27,357		26,969
Diluted	27,443		27,038		27,357		26,969

See accompanying notes.

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Matrix Service Company

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(unaudited)


	Three Months Ended				Nine Months Ended
	March 31, 2024		March 31, 2023		March 31, 2024		March 31, 2023
Net loss	$	(14,581)	$	(12,686)	$	(20,599)	$	(52,025)
Other comprehensive income (loss), net of tax:
Foreign currency translation loss	(548)		(234)		(524)		(722)
Comprehensive loss	$	(15,129)	$	(12,920)	$	(21,123)	$	(52,747)

See accompanying notes.

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Matrix Service Company

Condensed Consolidated Balance Sheets

(In thousands)

(unaudited)


	March 31, 2024		June 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	69,658	$	54,812
Accounts receivable, less allowances (March 31, 2024—$428 and June 30, 2023—$1,061)	172,924		145,764
Costs and estimated earnings in excess of billings on uncompleted contracts	34,600		44,888
Inventories	9,057		7,437
Income taxes receivable	325		496
Prepaid expenses	6,606		5,741
Other current assets	—		3,118
Total current assets	293,170		262,256
Restricted cash	25,000		25,000
Property, plant and equipment - net	44,711		47,545
Operating lease right-of-use assets	17,911		21,799
Goodwill	29,061		29,120
Other intangible assets, net of accumulated amortization	1,925		3,066

Other assets, non-current (Note 2)	28,227		11,718
Total assets	$	440,005	$	400,504

See accompanying notes.

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Matrix Service Company

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(unaudited)


	March 31, 2024		June 30, 2023
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	55,192	$	76,365
Billings on uncompleted contracts in excess of costs and estimated earnings	167,657		85,436
Accrued wages and benefits	18,068		13,679

Accrued insurance	5,699		5,579
Operating lease liabilities	3,624		4,661

Other accrued expenses	2,009		1,815
Total current liabilities	252,249		187,535
Deferred income taxes	25		26
Operating lease liabilities	17,947		20,660
Borrowings under asset-backed credit facility	—		10,000
Other liabilities, non-current	3,982		799
Total liabilities	274,203		219,020
Commitments and contingencies
Stockholders’ equity:
Matrix Service Company stockholders' equity:
Common stock—$0.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of March 31, 2024 and June 30, 2023; 27,304,734 and 27,047,318 shares outstanding as of March 31, 2024 and June 30, 2023, respectively	279		279
Additional paid-in capital	142,634		140,810
Retained earnings	38,318		58,917
Accumulated other comprehensive loss	(9,293)		(8,769)
Treasury stock, at cost — 583,483 shares as of March 31, 2024, and 840,899 shares as of June 30, 2023	(6,136)		(9,753)
Total stockholders' equity	165,802		181,484
Total liabilities and stockholders’ equity	$	440,005	$	400,504

See accompanying notes.

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Matrix Service Company

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Nine Months Ended
	March 31, 2024		March 31, 2023
Operating activities:
Net loss	$	(20,599)	$	(52,025)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	8,337		10,499
Goodwill impairment	—		12,316
Stock-based compensation expense	5,765		5,154



Gain on sale of property, plant and equipment (Note 3)	(4,530)		(21)
Provision for uncollectible accounts	(33)		(63)

Other	202		189
Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable, net of allowance for credit losses	(43,080)		(9,484)
Costs and estimated earnings in excess of billings on uncompleted contracts	10,288		(8,646)
Inventories	(1,620)		1,947
Other assets and liabilities	1,653		10,401
Accounts payable	(20,923)		(9,344)
Billings on uncompleted contracts in excess of costs and estimated earnings	82,221		49,623
Accrued expenses	7,886		(8,143)
Net cash provided by operating activities	25,567		2,403
Investing activities:
Capital expenditures	(5,689)		(6,212)


Proceeds from asset sales (Note 3)	5,535		110
Net cash used by investing activities	(154)		(6,102)
Financing activities:
Advances under asset-backed credit facility	10,000		10,000
Repayments of advances under asset-backed credit facility	(20,000)		(10,000)




Proceeds from issuance of common stock under employee stock purchase plan	132		200
Repurchase of common stock for payment of statutory taxes due on equity-based compensation	(456)		(310)




Net cash used by financing activities	(10,324)		(110)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(243)		(358)
Net increase (decrease) in cash, cash equivalents and restricted cash	14,846		(4,167)
Cash, cash equivalents and restricted cash, beginning of period	79,812		77,371
Cash, cash equivalents and restricted cash, end of period	$	94,658	$	73,204
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Income taxes	$	(148)	$	(13,286)
Interest	$	776	$	1,675

Non-cash investing and financing activities:
Purchases of property, plant and equipment on account	$	39	$	30

See accompanying notes.

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Matrix Service Company

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)

(unaudited)


	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances, December 31, 2023	$	279	$	140,668	$	52,899	$	(8,745)	$	(6,191)	$	178,910
Net loss	—		—		(14,581)		—		—		(14,581)
Other comprehensive income	—		—		—		(548)		—		(548)



Treasury shares sold to Employee Stock Purchase Plan (4,249 shares)	—		(14)		—		—		55		41


Stock-based compensation expense	—		1,980		—		—		—		1,980
Balances, March 31, 2024	$	279	$	142,634	$	38,318	$	(9,293)	$	(6,136)	$	165,802

Balances, December 31, 2022	$	279	$	137,989	$	71,939	$	(8,663)	$	(10,092)	$	191,452
Net loss	—		—		(12,686)		—		—		(12,686)
Other comprehensive income	—		—		—		(234)		—		(234)



Treasury shares sold to Employee Stock Purchase Plan (10,233 shares)	—		(139)		—		—		203		64


Stock-based compensation expense	—		1,407		—		—		—		1,407
Balances, March 31, 2023	$	279	$	139,257	$	59,253	$	(8,897)	$	(9,889)	$	180,003


	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances, June 30, 2023	$	279	$	140,810	$	58,917	$	(8,769)	$	(9,753)	$	181,484
Net loss	—		—		(20,599)		—		—		(20,599)
Other comprehensive income	—		—		—		(524)		—		(524)


Issuance of restricted stock (297,026 shares)	—		(3,868)		—		—		3,868		—
Treasury shares sold to Employee Stock Purchase Plan (15,714 shares)	—		(73)		—		—		205		132

Treasury shares purchased to satisfy tax withholding obligations (55,324 shares)	—		—		—		—		(456)		(456)
Stock-based compensation expense	—		5,765		—		—		—		5,765
Balances, March 31, 2024	$	279	$	142,634	$	38,318	$	(9,293)	$	(6,136)	$	165,802

Balances, June 30, 2022	$	279	$	139,854	$	111,278	$	(8,175)	$	(15,530)	$	227,706
Net loss	—		—		(52,025)		—		—		(52,025)
Other comprehensive loss	—		—		—		(722)		—		(722)


Issuance of restricted stock (259,529 shares)	—		(5,149)		—		—		5,149		—
Treasury shares sold to Employee Stock Purchase Plan (40,377 shares)	—		(602)		—		—		802		200

Treasury shares purchased to satisfy tax withholding obligations (52,864 shares)	—		—		—		—		(310)		(310)
Stock-based compensation expense	—		5,154		—		—		—		5,154
Balances, March 31, 2023	$	279	$	139,257	$	59,253	$	(8,897)	$	(9,889)	$	180,003

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Matrix Service Company

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1 – Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements include the accounts of Matrix Service Company and its subsidiaries (“Matrix”, “we”, “our”, “us”, “its” or the “Company”), unless otherwise indicated. Intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. The information furnished reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair statement of the results of operations, cash flows and financial position for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2023, included in our Annual Report on Form 10-K. The results of operations for the three and nine month periods ended March 31, 2024 may not necessarily be indicative of the results of operations for the full year ending June 30, 2024.

Significant Accounting Policies

Our significant accounting policies are detailed in “Note 1 - Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended June 30, 2023.

Accounting Standards Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and requires enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The update will be effective for annual periods beginning after December 15, 2023 (fiscal 2025). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024 (fiscal 2026). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows.

Other accounting pronouncements issued but not effective until after March 31, 2024 are not expected to have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

Note 2 – Revenue

Remaining Performance Obligations

We had $680.0 million of remaining performance obligations yet to be satisfied as of March 31, 2024. We expect to recognize $431.9 million of our remaining performance obligations as revenue within the next twelve months.

Contract Balances

Contract terms with customers include the timing of billing and payments, which usually differs from the timing of revenue recognition. As a result, we carry contract assets and liabilities in our balance sheet. These contract assets and liabilities are calculated on a contract-by-contract basis and are classified as current. We present our contract assets in the balance sheet as Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts ("CIE"). CIE consists of revenue recognized in excess of billings. We present our contract liabilities in the balance sheet as Billings on Uncompleted Contracts in Excess of Costs and Estimated Earnings ("BIE"). BIE consists of billings in excess of revenue recognized. The following table provides information about CIE and BIE:

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Table of Contents


	March 31, 2024		June 30, 2023		Change
	(In thousands)
Costs and estimated earnings in excess of billings on uncompleted contracts	$	34,600	$	44,888	$	(10,288)
Billings on uncompleted contracts in excess of costs and estimated earnings	(167,657)		(85,436)		(82,221)
Net contract liabilities	$	(133,057)	$	(40,548)	$	(92,509)

SEC Form 10-Q filed by Matrix Service Company